This is a relatively new order type that has again been
introduced into the market by the spread betting industry. This
order type is perfect for those clients who wish to spend time away
from their computer screen or mobile device but who wish to take
advantage of further positive market movements.
For example if the current price of £/$ is 1.6200 and we place a
limit order to buy £5 per point of the £/$ if the price trades at
1.6190 with a trailing stop of 50 points. We will only establish a
new trade if the market trades down to 1.6190 and at that point we
will automatically have a trailing stop of 50 points added to our
opening trade. This means that if the market moves higher from the
opening trade level our stop loss will move up so that it is 50
points below the current market level rather than remaining at a
level of 50 points below our original opening trade (as would be
the case if this was simply a 50 point stop loss). This allows the
trader to be more flexible with his time and not to have to
continue to be on hand to move his stop loss up as the market moves
in his favour. The ultimate aim of a trailing stop is to create a
'no lose' trade where the stop loss ends up being at, or above, the
opening trade level.